Increasing Announcements of Plant Closures and Production Relocations

This week, two companies owned by multinationals – Velenje's Gorenje and Šempeter's Mahle – announced the closure or relocation of part of their production. Economist Dr. Marko Jaklič believes that these are the first signs of structural changes in the market and that Slovenian companies will also have to follow suit if they want to remain competitive.

Gorenje, which is owned by China's Hisense, announced at the beginning of the week that it will close its plant in Rogatec, where they manufacture components for refrigeration and freezing appliances, by the end of August 2025. They will significantly reduce production at this location by the end of this year. They explained that they decided to do so because they are no longer competitive in manufacturing components at this location. The production of refrigeration and freezing appliances, for which they make components in Rogatec, has been taking place for years at their plant in Valjevo, Serbia. This will result in the loss of 120 jobs in the Styrian town, but since Gorenje, like other companies, needs production workers, they will offer jobs to all employees at Gorenje's factories in Velenje and also provide transportation there. Those who do not wish to relocate will receive severance pay.

Decline in Demand

Just two days later, news came from Mahle, which is part of the German Mahle group, that they plan to close 340 jobs due to the relocation of e-compressor production to Hungary and Bosnia and Herzegovina as part of production optimization. Another 270 workers are expected to lose their jobs. In total, more than 600 jobs are at stake. The director of Mahle Electric Drives Slovenia, Guntram Haas, said that they are currently experiencing a decline in almost all markets in which they operate – automotive, electric bicycles, off-road mobile machinery, and other segments.

 Marko Jaklič Photo Mavric Pivk

Economist Marko Jaklič is concerned that this is not just a short-term economic cooling but structural changes in the market, especially since part of this production is not being discontinued but relocated. "In the automotive industry, there is long-term lower demand for certain production parts and products, and competition from China is also increasing," he warns. According to him, such decisions are further influenced by uncompetitive business conditions, especially regarding wages. "The cost of labor and the burden of taxes and contributions are felt not only among low-skilled workers but also among development staff," he warns. He adds that these foreign companies are just the first harbingers of adapting to market changes, and Slovenian companies will also have to follow suit if they want to remain competitive.

Layoff Announcements

Gorenje and Mahle are not isolated cases. Maribor Foundry (MLM) with 350 employees, which had been facing difficulties for some time and is also an automotive supplier, went bankrupt at the end of August. Kidričevo supplier Boxmark Leather will, due to a drop in orders, lay off 120 employees by the end of the year. Poljčane's Eurela, which manufactures small household appliances and various components, will reduce its workforce by 21 due to a decrease in orders, and in Žiri's Alpina, 60 employees are expected to lose their jobs by the end of the year due to the relocation of part of the production to Bosnia and Herzegovina. Cimos is also planning to relocate production to Serbia, where it already has a foundry.

According to the employment office, all this will somewhat affect registered unemployment. However, as Delo recently reported, Anka Rode from the employment office said: "It is likely that most of the laid-off workers will be in production, which has been a highly sought-after profile in the labor market in recent years. There is already a general shortage of workforce in most sectors in Slovenia, so the chances of employment are high. Those who have the competencies and qualities that are in demand in the market and sought by companies that will not be (greatly) affected by the crisis will find employment more quickly."